Judge Diane Hathaway's Lawyer on Her Bank Fraud: 'It was Dumb'

Diane Hathaway must have wanted to pinch herself, wake up from the nightmare and return to her prestigious perch in life, sitting on the state Supreme Court.

She couldn’t have imagined it would end like this.

But here she was, the daughter of a Detroit cop, educated in the city, standing in disgrace Tuesday morning in federal court in Ann Arbor, like a common defendant, pleading guilty to bank fraud as a gallery full of media members looked on including Ross Jones of WXYZ, who broke the story about her financial scheme. Her husband Michael J. Kingsley, an attorney, was also on hand as was U.S. Attorney Barbara McQuade.

U.S. District Judge John Corbett O’Meara set sentencing for May 28 at 2 p.m. She faces up to 18 months, but could conceivably get probation.

Hathaway, 58, pleaded guilty to a real estate scheme in which she transferred properties out of her name to make it look as if she had less assets, all so she could get a short sale on her Grosse Pointe Park home and get out of $600,000 she owed the bank, ING Direct. The original mortgage was $1.4 million and the home was sold for $800,000 in the short sale.

As part of the scheme, Hathaway also pretended as if she was in financial distress and would soon be leaving the bench. In short sales, banks allow owners in financial distress to sell for less than what's owed on the property.

That clever little scheme destroyed a 20-year career on the bench, which included a lengthy stint in Wayne County Circuit Court. She resigned from the state Supreme Court on Jan. 21.

Before the hearing began, Hathaway, clad in a dark pants suit, appeared relaxed and smiled occasionally. During the hearing, she stood before the podium answering questions from the judge, often with a “yes” or “no.” At times, she was barely audible as her attorney, Steve Fishman, was flanked to her left and Assistant U.S. Attorney Daniel Lemisch to her right.

Then instead of reciting to the judge what she had done wrong, her attorney Fishman read her a series of questions regarding the allegations to which she responded “yes.”

As part of the plea agreement, the government agreed to drop a civil case and not try to seize her $740,000 water-front Florida home.

Afterwards, Fishman said what she did “was dumb. It made no sense.”

He said the bank would have approved the shortsale even if she had listed all her assets. And he said the $600,000 in fraud the government initially cited by the government was erroneous. He said the loss to the bank was more like $40,000 to $90,000.

Why?

He explained that at the closing of the short sale, she brought a check for $10,000, which was the closing fee for the short sale.

He said had she listed her assets, the bank would have required her to bring a check for $50,000 to $100,000 instead of the $10,000 she brought. Thus, the loss of between $40,000 to $90,000.

Fishman said he plans to argue for probation, saying Hathaway will bring a check on the day of sentencing to cover the loss to the bank. That exact figure has yet to be determined.

As for his client, he said: “She feels terrible. She let down a lot of people.”

U.S. Attorney McQuade, at a press conference held in downtown Detroit in the afternoon, said mortgage fraud is a high priority for her office and that she hopes Hathaway gets some prison time.

"We contemplate that prison time is part of the agreement," she said.

Michigan Attorney General Bill Schuette, who attended the press conference, said Gov. Rick Snyder will appoint a replacement for Hathaway. He also said "I think her law licnese out to be pulled."

Hathaway, whose maiden name is Washington, was elected to the Michigan Supreme Court in 2008. Before that she served as judge on the Wayne County Circuit Court for 16 years.

For Hathaway, it wasn’t a straight shot to the bench like many others who go from law school to being a lawyer to stepping onto the bench.

After high school, she attended Henry Ford Hospital School of Radiologic Technology and became an X-ray Technician, according to the Michigan Supreme Court Historical Society.

She also got a real estate broker’s license and worked in both radiology and real estate while raising her children and attending college, according to her biography on the historical society’s page.

She graduated with honors from Madonna University and received a bachelor of science in Allied Health and went on to get a law degree in 1987.